Jan. 3 (Bloomberg) -- China Southern Airlines Co. is among
four carriers from China and Taiwan to form a regional alliance
to challenge Cathay Pacific Airways Ltd. as warmer cross-strait
ties spur demand for direct flights.

Frequent travelers of any alliance member can redeem miles
for tickets and enjoy rewards such as free use of business
lounges from any of the four carriers, according to a joint
statement by the airlines. The grouping also includes China
Eastern Airlines Corp., the nation’s largest carrier by
passenger numbers after China Southern, Taoyuan, Taiwan-based
China Airlines Ltd. and Xiamen, China-based Xiamen Airlines Co.

Closer business and political ties between China and the
island has spurred travel demand, prompting airlines across the
strait to add more capacity in the high-yielding market,
according to the CAPA Centre for Aviation, which advises
airlines. The regional alliance would also challenge Hong Kong-based carriers such as Cathay Pacific in the cross-strait
market, the consultant said.

The alliance will account for half of the capacity directly
between China and Taiwan by offering more than 270 round-trip
flights every week, according to the statement. It also offers
280 cross-strait round-trip flights via Hong Kong every week.

Cathay Pacific and its Hong Kong Dragon Airlines Ltd. unit
offer about 128 flights from Hong Kong to Taipei every week,
according to the carrier’s website.

For China’s three biggest airlines, yields for flights to
Hong Kong, Taiwan and Macau are higher than domestic and
international routes, according to CAPA.

Taiwan has been ruled separately from China since 1949 when
members of the Kuomintang party fled to the island after a civil
war with Communist forces. Relations between Taiwan and China
reached their warmest in more than six decades after Taiwan
President Ma Ying-jeou took office in May 2008. He focused on
economic ties and dropped the pro-independence stance of his
predecessor.

The airlines in the new alliance are all SkyTeam members.
Cathay Pacific is a member of the Oneworld alliance.